Royal Gold Reports Third Quarter 2018 Results

May 02, 2018 04:05 PM Eastern Daylight Time

DENVER--(BUSINESS WIRE)--Royal Gold, Inc. (NASDAQ: RGLD) (together with its subsidiaries,
“Royal Gold” or the “Company,” “we” or “our”) reports a net loss of
$153.7 million, or ($2.35) per share, on revenue of $116.0 million in
its fiscal third quarter ended March 31, 2018 (“third quarter”). Third
quarter reported earnings include non-cash charges of $184.9 million,
net of tax. Absent these impacts, adjusted net income1 was
$31.3 million, or $0.48 per share, up 32% from the prior year quarter.

Third Quarter Highlights Compared to Prior Year Quarter:

Revenue of $116 million, an increase of 8%

Operating cash flow of $105 million, an increase of 37%

Volume of 87,300 GEOs,2 in line with the prior year quarter

Dividends paid of $16 million, an increase of 5%

Additional $75 million repaid on revolving credit facility

Average gold price of $1,329 per ounce, an increase of 9%

“We delivered another quarter of solid operating performance, which
included our first full quarter sales of gold and silver from Rainy
River,” commented Tony Jensen, President and CEO. “While a non-cash
impairment from Pascua-Lama impacted our reported earnings, we continue
to believe that the project presents significant option value for Royal
Gold shareholders. In the near term, we look forward to improved
production from Rainy River as it continues to mature, as well as growth
from the Peñasquito Pyrite Leach Project and Cortez Crossroads, which
are both expected to begin production late this calendar year.”

Recent Developments

Peak Gold Joint Venture

As of April 24, 2018, Royal Gold, through its wholly owned subsidiary,
Royal Alaska, LLC, owns a 40% interest in and manages the Peak Gold
Joint Venture (“Peak Gold JV”), for exploration and development of the
Peak Gold Project located near Tok, Alaska. CORE Alaska, LLC, a wholly
owned subsidiary of Contango ORE, Inc. (“CORE”), owns a 60% interest in
the Peak Gold JV. The approved exploration budget for 2018 is $9.1
million on a consolidated basis.

Royal Gold also owns net smelter return (“NSR”) royalties of 2.0% and
3.0% over separate areas comprising the Peak Gold Project, which has a
maiden resource of 11.3 million tonnes grading 3.46 grams per tonne gold.3

In a separate transaction on April 5, 2018, Royal Gold entered into a
purchase agreement with a private seller to purchase 809,744 shares of
CORE common stock, equating to an approximately 13.6% equity interest in
CORE.

Pascua-Lama

The Company owns a 0.78% to 5.45% sliding-scale NSR gold royalty and a
1.09% NSR copper royalty on the Pascua-Lama project, owned by Barrick
Gold Corporation (“Barrick”). The project straddles the border of Chile
and Argentina. Our royalty interests are applicable to all gold and
copper production from the portion of the Pascua-Lama project lying on
the Chilean side of the border.

On February 6, 2018, Barrick announced it reclassified Pascua-Lama’s
proven and probable gold reserves4 of approximately 14
million ounces as measured and indicated resources.3 A
significant reduction in reserves or mineralized material is an
indicator of potential impairment.

On April 23, 2018, Barrick announced that work performed to date on the
prefeasibility study for a potential underground project at Pascua-Lama
was suspended. Barrick will continue to evaluate opportunities to
de-risk the project while maintaining Pascua-Lama as an option for
development in the future if economics improve and related risks can be
mitigated.

An impairment charge of $239.4 million ($178.9 million net of taxes) was
taken during the third quarter, resulting in a carrying value of $177.7
million as of March 31, 2018. As part of our impairment determination,
the fair value for Pascua-Lama was estimated by calculating the net
present value of future cash flows expected to be generated from mining
the Pascua-Lama deposits subject to our royalty interest.

Wassa and Prestea

On April 12, 2018, Golden Star announced that it more than doubled its
inferred mineral resource3 estimate for its Wassa underground
mine in Ghana, to 5.2 million ounces of gold from 2.1 million ounces at
year-end 2017.

Mount Milligan

As previously reported, Centerra Gold (“Centerra”) temporarily suspended
mill operations at Mount Milligan on December 27, 2017 due to
insufficient fresh water. Mill operations restarted on February 5,
2018 with a single ball mill, and the second ball mill restarted on
March 23, 2018. Centerra reported on May 1, 2018 that Mount Milligan was
operating at an average throughput of approximately 40,000 tonnes per
day, and that once the spring snow melt is underway, throughput is
expected to increase to a targeted average of 55,000 tonnes per day for
the second half of the calendar year.

Centerra is pursuing more permanent permitting solutions to allow higher
levels of pumping from current water sources and is developing
additional ground water sources for Mount Milligan to proactively
mitigate potential future water shortages during winter months.

Our third quarter results were not impacted by the temporary shutdown of
the mill processing facility. Due to the timing of shipments and
deliveries of gold and copper, we expect the impact of the temporary
shutdown to be reflected in Royal Gold’s mid-calendar 2018 results, as
some of the deliveries of gold and copper that were expected in the June
through August 2018 period will be deferred to a later date.

Attributable Reserves

Royal Gold also announces updated estimates of ore reserves and
mineralized material5 attributable to the Company’s stream,
royalty and similar interests as of December 31, 2017. These figures are
provided by the operators of properties on which the Company holds these
interests, or are obtained by Royal Gold through publicly available
information.

On a gold equivalent basis6, metals reserves attributable to
Royal Gold were 6.3 million ounces, on a net reserve basis, at year end
2017, compared with 7.2 million ounces for the same period ended 2016.
The reduction in reserves was principally due to the reclassification of
reserves to resources at Pascua-Lama, as well as net depletion.

Third Quarter Overview

Third quarter revenue was $116.0 million compared to $107.0 million in
the prior year quarter.Stream and royalty revenue totaled
$83.0 million and $33.0 million, respectively, for the third quarter.
Revenue increased due to higher gold and copper prices as well as
increased stream sales from Wassa and Prestea, copper at Mount Milligan,
and new production from Rainy River, partially offset by lower metal
sales at Pueblo Viejo and Andacollo.

Third quarter ending inventory was comprised of 26,000 gold ounces and
659,000 silver ounces, an increase over the prior quarter due to
deliveries received in late March. We expect our fiscal fourth quarter
2018 sales related to our streaming agreements to be in line with the
third quarter as inventory is expected to be reduced according to our
routine sales procedures, offsetting lower expected deliveries from
Mount Milligan.

Third quarter cost of sales of $21.3 million was below the $22.4 million
recorded in the prior year quarter, driven by lower portfolio gold and
silver sales.

General and administrative expenses increased to $8.1 million in the
third quarter, compared to $5.4 million in the prior year quarter. The
increase was primarily related to an increase in legal costs of $1.3
million and an increase in non-cash compensation of $1.2 million.

Exploration costs, which are related to our Peak Gold JV, were $536,000
in the third quarter, a decrease from $2.7 million the prior year
quarter, due to reduced field work during the winter months.

We recognized an income tax benefit totaling $45.9 million in the third
quarter, compared with an income tax expense of $6.5 million in the
prior year quarter. This resulted in an effective tax rate of 22.9% in
the current period, compared with 23.2% in the prior year quarter. The
third quarter tax benefit was related to the Pascua-Lama impairment and
was somewhat offset by a $6 million increase to uncertain tax
liabilities.

At March 31, 2018, we had current assets of $151.9 million compared to
current liabilities of $43.5 million, resulting in working capital
of $108.4 million. This compares to current assets of $165.5 million and
current liabilities of $41.6 million at December 31, 2017, resulting in
working capital of $123.9 million.

During the third quarter, liquidity needs were met from our available
cash resources and $94.7 million in revenue net of our streaming
payments. The Company repaid $75 million of the outstanding revolving
credit facility during the quarter resulting in $925 million available
and $75 million outstanding under the revolving credit facility as of
March 31, 2018. Working capital, combined with the Company’s undrawn
revolving credit facility, totaled approximately $1 billion of liquidity
at March 31, 2018.

PROPERTY HIGHLIGHTS

A summary of third quarter and historical production reported by
operators of our stream and royalty properties can be found on Tables 1
and 2. Calendar year 2018 operator production estimates of certain
properties in which we have interests compared to actual production
through March 31, 2018 can be found on Table 3. Results of our streaming
business for the third quarter, compared to the prior year quarter, can
be found on Table 4. Highlights at certain of the Company’s principal
producing and development properties during the third quarter, compared
to the prior year quarter, are detailed in our Annual Report on Form
10-K.

____________________________

1

Adjusted Net Income is a non-GAAP measure. Please see Schedule A
for reconciliation.

2

Gold Equivalent Ounces, (“GEOs”) are calculated as revenue divided
by the average gold price for the same period. GEOs net of stream
payments were 71,200 in the third quarter, compared to 69,400 in the
prior year quarter.

3

The U.S. Securities and Exchange Commission does not recognize the
term “resource.” “Resources” are not reserves under the SEC’s
regulations, but are categorized under the securities law
regulations of certain foreign jurisdictions in order of increasing
geological confidence into “inferred resources,” “indicated
resources” and “measured resources.” Investors are cautioned that
resources cannot be classified as reserves unless and until it is
demonstrated that they may be legally and economically extracted and
produced and, as a result, they should not assume that all or any
part of mineralized material in any of these categories will ever be
converted into reserves.

4

Cautionary Note to U.S. Investors Concerning Estimates of Proven and
Probable Mineral Reserves and Measured and Indicated Mineral
Resources: The mineral reserve and resource estimates reported by
Barrick were prepared in accordance with Canadian Institute of
Mining, Metallurgy and Petroleum Definition Standards for Mineral
Resources and Mineral Reserves. Royal Gold has not reconciled the
reserve and resource estimates provided by Barrick with definitions
of reserves used by the U.S. Securities and Exchange Commission.

5

The U.S. Securities and Exchange Commission does not recognize this
term. Mineralized material is that part of a mineral system that has
potential economic significance but cannot be included in the proven
and probable ore reserve estimates until further drilling and
metallurgical work is completed, and until other economic and
technical feasibility factors based upon such work have been
resolved. Investors are cautioned not to assume that any part or all
of the mineral deposits in this category will ever be converted into
reserves.

6

Gold equivalent basis is calculated as total attributable gold
ounces plus non-gold metals calculated with the following ratios per
ounce of gold for 2017, using a year-end gold price of $1,291 per
ounce: 76 ounces of silver, 397 pounds of copper, 1,143 pounds of
lead, 861 pounds of zinc, and 232 pounds of nickel. For 2016,
non-gold metals were calculated using a year-end gold price of
$1,146: 71 ounces of silver, 458 pounds of copper, 1,273 pounds of
lead, 988 pounds of zinc, and 252 pounds of nickel.

CORPORATE PROFILE

Royal Gold is a precious metals stream and royalty company engaged in
the acquisition and management of precious metal streams, royalties and
similar production based interests. The Company owns interests on 192
properties on six continents, including interests on 39 producing mines
and 22 development stage projects. Royal Gold is publicly traded on the
NASDAQ Global Select Market under the symbol “RGLD.” The Company’s
website is located at www.royalgold.com.

Note: Management’s conference call reviewing the third quarter
results will be held on Thursday, May 3, 2018, at noon Eastern Time
(10:00 a.m. Mountain Time). The call will be webcast and archived on the
Company’s website for a limited time.

Cautionary “Safe Harbor” Statement Under the Private Securities
Litigation Reform Act of 1995: With the exception of historical
matters, the matters discussed in this press release are forward-looking
statements that involve risks and uncertainties that could cause actual
results to differ materially from projections or estimates contained
herein. Such forward-looking statements include statements about
Barrick’s reclassification of gold reserves to mineralized material at
Pascua-Lama and suspension of work on the underground project
pre-feasibility study, the impact of the Company’s non-cash impairment
of the Pascua-Lama royalty, and the option value of the Pascua-Lama
project for the Company’s shareholders; improved production at Rainy
River; growth from production at the Peñasquito Pyrite Leach Project and
at Cortez Crossroads, and expected commencement of production at each;
anticipated exploration spending at the Peak Gold Project and mineral
resources reported for the Project; the agreement to purchase shares of
CORE; the increase in estimated inferred mineral resource for Wassa
underground; the impact of the temporary shutdown and subsequent restart
of mill processing operations at Mount Milligan; and operators’
production estimates for calendar year 2018. Net gold and metal reserves
attributable to Royal Gold’s stream, royalty and other interests are
subject to certain assumptions and, like reserves, do not reflect actual
ounces that will be produced. Like any stream, royalty or similar
interest on a non-producing or not-yet-in-development project, our
interests on development projects are subject to certain risks, such as
the ability of the operators to bring the projects into production and
operate in accordance with their feasibility studies and mine plans, and
the ability of Royal Gold to make accurate assumptions regarding
valuation and timing and amount of payments. In addition, many of our
interests are subject to risks associated with conducting business in a
foreign country, including application of foreign laws to contract and
other disputes, foreign environmental laws and enforcement and uncertain
political and economic environments. Factors that could cause actual
results to differ materially from the projections include, among others,
precious metals, copper and nickel prices; performance of and production
at the Company's stream and royalty properties, including gold and
copper production at Mount Milligan and gold and silver production at
Pueblo Viejo; the ability of operators to finance project construction
to completion and bring projects into production as expected, including
development stage mining properties, mine and mill expansion projects
and other development and construction projects; operators’ delays in
securing or inability to secure or maintain necessary governmental
permits; decisions and activities of the operators of the Company's
stream and royalty properties; unanticipated grade, environmental,
geological, seismic, metallurgical, processing, liquidity or other
problems the operators of the Company’s stream and royalty properties
may encounter; operators’ inability to access sufficient raw materials,
water or power; changes in operators’ project parameters as plans
continue to be refined; changes in estimates of reserves and
mineralization by the operators of the Company’s stream and royalty
properties; contests to the Company’s stream and royalty interests and
title and other defects in the properties where the Company holds stream
and royalty interests; errors or disputes in calculating stream
deliveries and royalty payments, or deliveries or payments not made in
accordance with stream and royalty agreements; economic and market
conditions; changes in laws governing the Company and its stream and
royalty interests or the operators of the properties subject to such
interests, and other subsequent events; as well as other factors
described in the Company's Annual Report on Form 10-K, Quarterly Reports
on Form 10-Q, and other filings with the Securities and Exchange
Commission. Most of these factors are beyond the Company’s ability to
predict or control. The Company disclaims any obligation to update any
forward-looking statement made herein. Readers are cautioned not to put
undue reliance on forward-looking statements.

Statement Regarding Third-Party Information: Certain information
provided in this press release, including production estimates for
calendar 2018, has been provided to us by the operators of the relevant
properties or is publicly available information filed by these operators
with applicable securities regulatory bodies, including the Securities
and Exchange Commission. Royal Gold has not verified, and is not in a
position to verify, and expressly disclaims any responsibility for, the
accuracy, completeness or fairness of such third-party information and
refers the reader to the public reports filed by the operators for
information regarding those properties.

TABLE 1

Third Quarter Fiscal 2018

Revenue and Operators’ Reported Production for Principal Stream
and Royalty Interests

(In thousands, except reported production in oz. and lbs.)

Three Months Ended

Three Months Ended

March 31, 2018

March 31, 2017

Reported

Reported

Stream/Royalty

Metal(s)

Revenue

Production1

Revenue

Production1

Stream:

Mount Milligan

$

47,807

$

35,112

Gold

25,800

oz.

28,900

oz.

Copper

4.3

Mlbs.

N/A

Pueblo Viejo2

$

15,734

$

24,524

Gold

8,500

oz.

15,600

oz.

Silver

260,800

oz.

322,000

oz.

Wassa and Prestea

Gold

$

8,350

6,300

oz.

$

6,563

5,400

oz.

Andacollo

Gold

$

7,186

5,400

oz.

$

10,398

8,500

oz.

Rainy River

$

3,902

$

N/A

Gold

2,800

oz.

N/A

Silver

11,100

oz.

N/A

Total stream revenue

$

82,979

$

76,597

Royalty:

Peñasquito

$

6,452

$

6,981

Gold

91,200

oz.

137,500

oz.

Silver

5.0

Moz.

4.8

Moz.

Lead

26.0

Mlbs.

31.3

Mlbs.

Zinc

88.0

Mlbs.

88.5

Mlbs.

Cortez

Gold

$

1,901

18,900

oz.

$

1,068

11,300

oz.

Other3

Various

$

24,651

N/A

$

22,326

N/A

Total royalty revenue

$

33,004

$

30,375

Total Revenue

$

115,983

$

106,972

TABLE 1

Third Quarter Fiscal 2018

Revenue and Operators’ Reported Production for Principal Stream
and Royalty Interests

(In thousands, except reported production in oz. and lbs.)

Nine Months Ended

Nine Months Ended

March 31, 2018

March 31, 2017

Reported

Reported

Stream/Royalty

Metal(s)

Revenue

Production1

Revenue

Production1

Stream:

Mount Milligan

$

101,390

$

105,161

Gold

57,100

oz.

83,500

oz.

Copper

8.7

Mlbs.

N/A

Pueblo Viejo2

$

67,492

$

71,911

Gold

35,900

oz.

40,200

oz.

Silver

1.3

Moz.

1.2

Moz.

Andacollo

Gold

$

41,124

32,100

oz.

$

41,552

32,900

oz.

Wassa and Prestea

Gold

$

26,049

20,200

oz.

$

17,484

14,000

oz.

Rainy River

$

4,973

$

N/A

Gold

3,600

oz.

N/A

Silver

11,100

oz.

N/A

Total stream revenue

$

241,028

$

236,108

Royalty:

Peñasquito

$

20,439

$

19,935

Gold

296,200

oz.

423,000

oz.

Silver

15.9

Moz.

15.1

Moz.

Lead

95.5

Mlbs.

97.8

Mlbs.

Zinc

274.8

Mlbs.

232.1

Mlbs.

Cortez

Gold

$

7,823

73,800

oz.

$

4,942

47,600

oz.

Other3

Various

$

73,517

N/A

$

70,895

N/A

Total royalty revenue

$

101,779

$

95,772

Total revenue

$

342,807

$

331,880

TABLE 2

Operators’ Historical Production

Reported Production For The Quarter Ended1

Property

Operator

Stream/Royalty

Metal(s)

Mar. 31, 2018

Dec. 31, 2017

Sep. 30, 2017

Jun. 30, 2017

Mar. 31, 2017

Stream:

Mount Milligan4

Centerra

35% of payable gold

Gold

25,800

oz.

12,600

oz.

18,600

oz.

19,800

oz.

28,900

oz.

18.75% of payable copper

Copper

4.3

Mlbs.

1.8

Mlbs.

2.6

Mlbs.

2.6

Mlbs.

N/A

Pueblo Viejo

Barrick (60%)

7.5% of gold produced up to 990,000 ounces; 3.75% thereafter

Gold

8,500

oz.

14,500

oz.

12,900

oz.

10,500

oz.

15,600

oz.

75% of payable silver up to 50 million ounces; 37.5% thereafter

Silver

260,800

oz.

469,600

oz.

536,600

oz.

374,500

oz.

322,000

oz.

Andacollo

Teck

100% of gold produced

Gold

5,400

oz.

17,000

oz.

9,700

oz.

14,900

oz.

8,500

oz.

Rainy River

New Gold

6.5% of gold produced up to 230,000 ounces; 3.25% thereafter

Gold

2,800

oz.

800

oz.

N/A

N/A

N/A

60% of silver produced up to 3.1 millions ounces delivered; 30%
thereafter

Silver

11,100

oz.

N/A

N/A

N/A

N/A

Wassa and Prestea5

Golden Star

10.5% of gold produced up to 240,000 ounces; 5.5% thereafter

Gold

6,300

oz.

6,800

oz.

7,100

oz.

6,300

oz.

5,400

oz.

Royalty:

Peñasquito

Goldcorp

2.0% NSR

Gold

91,200

oz.

71,100

oz.

134,000

oz.

133,300

oz.

137,500

oz.

Silver

5.0

Moz.

5.1

Moz.

5.9

Moz.

5.6

Moz.

4.8

Moz.

Lead

26.0

Mlbs.

33.4

Mlbs.

36.2

Mlbs.

27.4

Mlbs.

31.3

Mlbs.

Zinc

88.0

Mlbs.

94.4

Mlbs.

92.4

Mlbs.

85.7

Mlbs.

88.5

Mlbs.

Cortez

Barrick

GSR1 and GSR2, GSR3, NVR1

Gold

18,900

oz.

25,000

oz.

29,900

oz.

16,600

oz.

11,300

oz.

FOOTNOTES

Tables 1 and 2

1

Reported production relates to the amount of metal sales that are
subject to our stream and royalty interests for the stated period,
as reported to us by operators of the mines.

2

The first silver stream deliveries were in March 2016, with the
first silver sales made during the June 2016 quarter.

3

Individually, no stream or royalty included within the “Other”
category contributed greater than 5% of our total revenue for the
entire period.

4

Reflects the October 20, 2016 amendment to our Mount Milligan
streaming agreement. Prior to the amendment, Royal Gold held a
52.25% gold stream. Gold concentrate that was in transit at October
20, 2016 was delivered to us under the 52.25% gold stream. Royal
Gold began receiving gold and copper deliveries reflecting the
amended stream agreement in April 2017.

5

The gold stream percentage at Wassa and Prestea increased to 10.5%
from 9.25%, effective January 1, 2018.

TABLE 3

Calendar 2018 Operator’s Production Estimate vs Actual Production

Calendar 2018 Operator's Production

Calendar 2018 Operator's Production

Estimate1

Actual2,3

Gold

Silver

Base Metals

Gold

Silver

Base Metals

Stream/Royalty

(oz.)

(oz.)

(lbs.)

(oz.)

(oz.)

(lbs.)

Stream:

Andacollo4

66,700

14,000

Mount Milligan5

195,000-215,000

47 - 52 million

29,500

6.1 million

Pueblo Viejo6

585,000-615,000

Not provided

141,000

Not provided

Rainy River7

310,000-350,000

Not provided

39,300

0.1 million

Wassa and Prestea

230,000-255,000

57,600

Royalty:

Cortez GSR1

48,300

18,500

Cortez GSR2

2,200

400

Cortez GSR3

50,500

18,900

Cortez NVR1

31,600

11,900

Peñasquito8

310,000

Not provided

98,000

5.2 million

Lead

160 million

26.0 million

Zinc

300 million

88.7 million

1

Production estimates received from our operators are for calendar
2018. There can be no assurance that production estimates received
from our operators will be achieved. Please refer to our cautionary
language regarding forward-looking statements and the statement
regarding third party information contained in this press release,
as well as the Risk Factors identified in Part I, Item 1A, of our
Fiscal 2017 Form 10-K for information regarding factors that could
affect actual results.

2

Actual production figures shown are from our operators and cover the
period January 1, 2018 through March 31, 2018.

3

Actual production figures for Cortez are based on information
provided to us by Barrick Gold Corporation, and actual production
figures for Andacollo, Mount Milligan, Pueblo Viejo, Peñasquito
(gold) and Wassa and Prestea are the publicly reported figures of
the operators of those properties.

4

The estimated and actual production figures shown for Andacollo are
contained gold in concentrate.

5

The estimated and actual production figures shown for Mount Milligan
are payable gold and copper in concentrate.

6

The estimated and actual production figures shown for Pueblo Viejo
are payable gold in doré and represent Barrick’s 60% interest in
Pueblo Viejo.

7

The estimated gold production figures shown for Wassa and Prestea
are payable gold in concentrate and doré.

8

The estimated and actual gold production figures shown for
Peñasquito are payable gold in concentrate. The operator did not
provide estimated silver production.

Net (loss) income per share available to Royal Gold common
stockholders:

Basic (loss) earnings per share

$

(2.35

)

$

0.36

$

(2.14

)

$

1.25

Basic weighted average shares outstanding

65,307,324

65,169,883

65,283,019

65,145,183

Diluted (loss) earnings per share

$

(2.35

)

$

0.36

$

(2.14

)

$

1.25

Diluted weighted average shares outstanding

65,307,324

65,274,926

65,283,019

65,267,201

Cash dividends declared per common share

$

0.25

$

0.24

$

0.74

$

0.71

ROYAL GOLD, INC.

Consolidated Statements of Cash Flows

(In thousands)

Three Months Ended

Nine Months Ended

March 31,

March 31,

March 31,

March 31,

2018

2017

2018

2017

Cash flows from operating activities:

Net (loss) income

$

(154,118

)

$

21,531

$

(143,359

)

$

75,588

Adjustments to reconcile net (loss) income to net cash provided by
operating activities:

Depreciation, depletion and amortization

39,679

40,164

121,380

119,785

Amortization of debt discount and issuance costs

3,787

3,451

11,200

10,202

Non-cash employee stock compensation expense

1,563

314

5,958

6,758

Impairments of royalty interests

239,364

—

239,364

—

Deferred tax benefit

(60,541

)

(3,055

)

(31,583

)

(6,266

)

Other

(41

)

—

(199

)

(4,638

)

Changes in assets and liabilities:

Royalty receivables

1,490

5,768

(909

)

(1,367

)

Stream inventory

(5,340

)

3,554

(4,816

)

2,865

Income tax receivable

26,217

(6,065

)

21,020

(6,117

)

Prepaid expenses and other assets

3,552

92

3,224

(743

)

Accounts payable

719

191

(939

)

(1,641

)

Income tax payable

(2,666

)

11,698

6,779

(422

)

Withholding taxes payable

201

(7,085

)

227

(5,449

)

Uncertain tax positions

6,429

1,289

10,989

7,341

Other liabilities

4,280

4,213

13,473

5,036

Net cash provided by operating activities

$

104,575

$

76,060

$

251,809

$

200,932

Cash flows from investing activities:

Acquisition of stream and royalty interests

(1,012

)

(10,903

)

(1,012

)

(203,721

)

Other

(1,157

)

(271

)

(1,251

)

1,503

Net cash used in investing activities

$

(2,169

)

$

(11,174

)

$

(2,263

)

$

(202,218

)

Cash flows from financing activities:

Borrowings from revolving credit facility

—

—

—

70,000

Repayment of revolving credit facility

(75,000

)

(45,000

)

(175,000

)

(45,000

)

Net payments from issuance of common stock

39

(298

)

(3,502

)

(2,618

)

Common stock dividends

(16,364

)

(15,680

)

(47,755

)

(45,715

)

Purchase of additional royalty interest from non-controlling interest

—

(24

)

—

(1,462

)

Other

163

218

240

(2,462

)

Net cash used in financing activities

$

(91,162

)

$

(60,784

)

$

(226,017

)

$

(27,257

)

Net increase (decrease) in cash and equivalents

11,244

4,102

23,529

(28,543

)

Cash and equivalents at beginning of period

98,132

83,988

85,847

116,633

Cash and equivalents at end of period

$

109,376

$

88,090

$

109,376

$

88,090

SCHEDULE A

Non-GAAP Financial Measures

Non-GAAP financial measures are intended to provide additional
information only and do not have any standard meaning prescribed by
generally accepted accounting principles (“GAAP”). These measures should
not be considered in isolation or as a substitute for measures of
performance prepared in accordance with GAAP.

Adjusted Net (Loss) Income Reconciliation

Management of the Company uses adjusted net income (loss) to evaluate
the Company’s operating performance, and for planning and forecasting
future business operations. The Company believes the use of adjusted net
income (loss) allows investors and analysts to understand the results
relating to receipt of revenue from its royalty interests and purchase
and sale of gold from its streaming interests by excluding certain items
that have a disproportionate impact on our results for a particular
period. The net income (loss) adjustments are presented net of tax
generally at the Company’s statutory effective tax rate. Management’s
determination of the components of adjusted net income (loss) are
evaluated periodically and based, in part, on a review of non-GAAP
financial measures used by mining industry analysts. Net income (loss)
attributable to Royal Gold stockholders is reconciled to adjusted net
income (loss) as follows:

Three Months Ended

Nine Months Ended

March 31,

March 31,

(Unaudited, in thousands)

(Unaudited, in thousands)

2018

2017

2018

2017

Net (loss) income attributable to Royal Gold common stockholders

$

(153,650

)

$

23,661

$

(139,786

)

$

81,509

Preliminary impacts of U.S. tax legislation

—

—

26,400

—

Income tax foreign currency election

132

—

16,032

—

Increase in uncertain tax positions

5,925

—

5,925

—

Impairments royalty interests, net of tax

178,856

—

178,856

—

Adjusted net income attributable to Royal Gold common stockholders

$

31,263

$

23,661

$

87,427

$

81,509

Net (loss) income attributable to Royal Gold common stockholders
per basic share

$

(2.35

)

$

0.36

$

(2.14

)

$

1.25

Preliminary impacts of U.S. tax legislation

—

—

0.40

—

Income tax foreign currency election

—

—

0.25

—

Increase in uncertain tax positions

0.09

—

0.09

—

Impairments royalty interests, net of tax

2.74

—

2.74

—

Adjusted net income attributable to Royal Gold common
stockholders per basic share

$

0.48

$

0.36

$

1.34

$

1.25

Net (loss) income attributable to Royal Gold common stockholders
per diluted share

$

(2.35

)

$

0.36

$

(2.14

)

$

1.25

Preliminary impacts of U.S. tax legislation

—

—

0.40

—

Income tax foreign currency election

—

—

0.25

—

Increase in uncertain tax positions

0.09

—

0.09

—

Impairments royalty interests, net of tax

2.74

—

2.74

—

Adjusted net income attributable to Royal Gold common
stockholders per diluted share